AN ACT RELATING TO TAXATION -- EMPLOYEE OWNERSHIP TAX CREDIT

HB 7696 establishes a tax credit for Rhode Island businesses transitioning to employee ownership structures. It provides up to 50% of eligible conversion costs (capped at $100,000 for worker-owned co-ops or employee ownership trusts, $25,000 for alternate structures) and up to 50% of expansion costs (capped at $25,000) for qualified businesses expanding existing employee ownership models. The credit applies to income tax years 2026-2028 for businesses converting to or expanding employee ownership trusts, employee stock ownership plans (ESOPs), worker-owned cooperatives, or defined "alternate equity structures" that meet specific participation and allocation requirements. This directly affects qualifying businesses seeking to shift ownership to employees while retaining community investment.